Location-based services is shaping up to be a significant portion of the mobile industry going forward. While Apple has traditionally not been very strong here, the company is quietly making gains and could even surpass Google in one quickly growing area: indoor location.

Apple Maps was considered a major misstep after its launch last year was met with numerous customer complaints. Fast forward a year, and Apple Maps has gained 35 million users but, even more importantly, the company has introduced iBeacon and acquired WiFiSLAM, pointing to a major focus on indoor location.

?Google has interior mapping technology already built into Google Maps ? that?s a place where they are still ahead of Apple, but I think that lead may not last long especially since Apple seems to have a plan about where they want to go, and it?s less obvious on the Google side what their plans is,? said Carl Howe, vice president of research at Yankee Group, Boston.

?Indoor location services is an easy extension from Apple?s retail strategy,? he said. ?Where are most of their stores? They are in malls. Would it be nice to be able to find the Apple store? Yeah, that would be helpful.

?By the way, while you are doing that, would you like to sign up for the rest of folks in the mall? You go down a road where all of a sudden you have created a nice little empire just because you are already in the mall.?

Google loses stickiness
A year ago, weakness in location-based services appeared to be a big problem for Apple thanks to the much publicized Apple Maps disaster.

However, recent research from comScore shows that Google has lost 23 million iPhone users since the introduction of Apple Maps, which had 35 million users in September.

Google?s loss of access to iOS users is potentially a big problem for the company now that Apple Maps is the default for iOS users.

?They clearly lose a little bit of advertising revenue,? Mr. Howe said. ?But what they really start losing is the stickiness of 'I live inside of a Google-ized world and always use Google for location information.'

?This gets pretty interesting as location-based services roll out,? he said.

Apple?s maps problem
Despite these gains, Apple still has a long ways to go to catch up to Google in maps.

Google Maps is still considered a superior product and favored by many users.

?[In terms of] direct on-maps opportunity, Apple still has a long way to go compared to Google,? said Jonathan Greene, managing director of mobile and social platforms at R/GA, New York.

?This will evolve as the maps have shown good progress as well,? he said.

Google also has a significant advantage over Apple when it comes to mobile search.

Mobile search is often location-oriented, with on-the-go users looking to find local businesses.

?Apple still has a long way to go in terms of using location-based marketing to connect consumers with real-world businesses,? said Blair Swedeen, senior vice president of strategy and business development for Placecast, San Francisco. ?Today, Google dominates the market for mobile search, with 85 percent market share.

?Apple can still compete and win in location-based marketing, but to do so they need to change the game with a differentiated offering rather than trying to compete head-to-head in mobile local search,? he said.

?For example, Apple could launch a Siri-like location-based offer concierge that consumers can configure to push relevant personalized offers to them based on their location and preferences.?

Once in a generation
While location-based services is still in the early days, it is expected to be a significant area of business for mobile companies.

There are already a broad range of services including geo-fencing and geo-targeting, with more expected to be introduced as a more sophisticated understanding of how mobile users are engaging with their devices evolves.

?Indoor is going to be a once in a generation revolution of the location industry,? said Patrick Connolly, London-based senior analyst at ABI Research. ?ABI Research is forecasting huge adoption of these technologies in retail stores, hotels, public venues and also across smartphones.

?In 2014, we are going to see a lot more developers designing with indoor location capabilities in mind,? he said. ?These technologies open up the ability to build internet-like analytics on customers as well as opening up a whole new targeted, hyperlocal advertising opportunity.

?Indoor location is also vital in supporting the quantified self and ambient intelligence, which is why companies like Google and Apple are designing in always-on location capabilities at the hardware level in their handsets.?

The battle moves indoors
One of the important battlegrounds will be in indoors, where GPS technology does not work.

Apple?s iBeacon could be a big player here.

Apple is already planning to use the iBeacons inside its own stores.

However, since Apple already has relationships with mall owners, it could negotiate a broader use of the technology.

While Google also owns indoor location technology it does not have the relationships with malls that Apple does.

The iBeacon technology is relatively inexpensive and works for a long period of time on a watch battery, which could be appealing to retailers.

With Apple?s acquisition earlier this year of indoor location technology firm WiFiSLAM, it is clear that indoor location is a focus for the company.

?The most interesting efforts are around indoor location, with the launch of iBeacons, the acquisitions of WiFiSLAM and designing a dedicated co-processor for sensor fusion in the latest iPhone,? Mr. Connolly said. ?Apple may have fallen behind in the outdoor mapping market, but it appears to be determined to compete on an equal footing on indoor."

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York